Wall Street sinks 3% after Fed cites economic 'risks'

The Fed's warning jolted investors on Wednesday, driving down US stocks more than 2 percent, while benchmark Treasury yields hit a more than 60-year low on the Fed's announcement of a $400 billion bond-buying program.

The dollar rallied against the euro and the yen, buoyed by the prospect of higher short-term rates as a result of the Fed's aim to push down longer-term interest rates by selling shorter-term notes and using the funds to buy longer-dated Treasuries.

The Dow Jones industrial average was down 283.82 points, or 2.49 percent, at 11,124.84. The Standard & Poor's 500 Index was down 35.33 points, or 2.94 percent, at 1,166.76. The Nasdaq Composite Index was down 52.05 points, or 2.01 percent, at 2,538.19.

European shares fell as growth concerns weighed on cyclical stocks in low-volume, volatile trade ahead of the results of a US Federal Reserve meeting to discuss fresh stimulus measures.

The FTSEurofirst 300 closed down 1.7 percent at 918.06 points in volume of around three-quarters of its 90-day average, while the Euro STOXX 50 Volatility index , a key regional measure of equity investor "fear", rose 3 percent.

The Nikkei average scored modest gains, bolstered by short-covering following a rise in Asian shares and ahead of the US Federal Reserve's policy decision. The Nikkei rose 0.2 percent to 8,741.16 but was capped below its 25-day moving average at 8,776. The broader Topix index climbed 0.3 percent to 757.13.